When forming a business in California, you will face many critical decisions. One of the earliest of these decisions involves choosing the type of business structure that will best benefit your enterprise. While an attorney experienced in business transactional work can guide you in making these decisions, it helps to learn about business structures on your own.
The business transactional work section of this blog has already discussed the process of forming a Limited Liability Company or LLC. This post will tackle the pros and cons of creating a corporation. Learning about some of these issues can help when it comes time to formalize your endeavors. Below you will find two pros and two cons of incorporation that may play a role in your final decision.
Pro: Incorporating your business can protect you from some liabilities. For example, a corporation separates you from your business, meaning you may not be liable for certain business debts.
Con: You may experience double taxation. For example, your business will have to pay taxes on any profits earned, but often stockholders like you must pay taxes on profits as well.
Pro: Incorporated businesses typically attract more powerful investors because of the possibility of acquiring stock in the business.
Con: Forming a corporation means complying with certain formalities like careful corporate record-keeping and holding regular meetings with directors. A less formal business structure like an LLC can free you from some of these formalities.
The corporation pros and cons discussed here are far from comprehensive. A great way to learn more is to seek advice from a law firm with a history of providing successful business transactional work to California entrepreneurs.